B-152421, FEB. 18, 1964

B-152421, FEB. 18, 1964

TO THE SECRETARY OF THE TREASURY:

THERE HAVE COME TO OUR ATTENTION CASES IN WHICH PAYMENTS HAVE BEEN MADE TO MEMBERS OR FORMER MEMBERS OF THE UNIFORMED SERVICES WHOSE MILITARY OR NAVAL RECORDS WERE CORRECTED PURSUANT TO THE PROVISIONS OF 10U.S.C. 1552 TO SHOW RESTORATION TO ACTIVE DUTY, EITHER FOR CONTINUATION OF SERVICE OR FOR THE INTERIM PERIOD IMMEDIATELY PRECEDING RETIREMENT, WITHOUT DEDUCTIONS ON ACCOUNT OF AMOUNTS EARNED IN CIVILIAN EMPLOYMENT DURING THE PERIODS COVERED BY THE PAYMENTS. WE HAVE BEEN INFORMALLY ADVISED THAT IN SIMILAR CASES INVOLVING MEMBERS OF THE COAST GUARD SUCH ADJUSTMENTS ARE NOT BEING MADE.

WHILE THERE IS NO SPECIFIC PROVISION IN THE CORRECTION OF RECORDS LAW OR THE COAST GUARD REGULATIONS FOR DEDUCTION OF AMOUNTS EARNED BY THE MEMBERS OR FORMER MEMBERS IN OUTSIDE EMPLOYMENT DURING THE CORRESPONDING PERIODS, WE THINK THAT THE PRACTICE OF THE COAST GUARD IN THIS CLASS OF CASES SHOULD BE REEXAMINED. THE CIVILIAN EARNINGS OF A MEMBER OR FORMER MEMBER EMPLOYED BY A FEDERAL AGENCY MUST BE DEDUCTED, SINCE THE RECEIPT THEREOF MUST BE CONSIDERED AS BEING INCOMPATIBLE WITH THE RECEIPT OF PAY AND ALLOWANCES FOR THE CORRESPONDING PERIOD. SEE 37 COMP. GEN. 255, 256, AND DECISIONS CITED THEREIN. IN OUR DECISION OF SEPTEMBER 9, 1963, B-152215, 43 COMP. GEN. ---, WE HELD THAT UNDER THE PROHIBITION OF THE DUAL EMPLOYMENT STATUTE OF JULY 31, 1894, CH. 174, 28 STAT. 205, AS AMENDED, 5 U.S.C. 62, THE INTERIM COMPENSATION RECEIVED BY A NAVAL OFFICER FROM FEDERAL EMPLOYMENT WAS REQUIRED TO BE REFUNDED AS A RESULT OF THE CORRECTION OF HIS NAVAL RECORDS TO SHOW HIS RESTORATION TO ACTIVE DUTY AND RETIREMENT.

IN VIEW OF SEVERAL RECENT COURT OF CLAIMS RULINGS IN RELATED CASES, WE BELIEVE THAT THE QUESTION AS TO THE PROPRIETY OF THE DEDUCTION OF EARNINGS RECEIVED INCIDENT TO INTERIM CIVILIAN EMPLOYMENT FROM RETROACTIVE PAY AND ALLOWANCES FOUND DUE A MEMBER AFTER THE CORRECTION OF HIS MILITARY RECORDS WARRANTS FURTHER CONSIDERATION. IN THE CASE OF CLACKUM V. UNITED STATES, CT.CL. NO. 246-56, DECIDED MARCH 6, 1963, THE COURT HELD THAT THE PLAINTIFF WAS ENTITLED TO RECOVER "HER PAY, ALLOWANCES FOR CLOTHING, QUARTERS, RATIONS, MUSTERING-OUT PAY, TRAVEL, AND AMOUNTS ATTRIBUTABLE TO LEAVE" THE TOTAL OF WHICH, ACCORDING TO STIPULATION, AMOUNTED TO $3,198.15, BUT RELYING ON THE CASE OF EGAN V. UNITED STATES, 141 CT.CL. 1, 27 (1958), THE COURT SPECIFIED THAT THERE WAS TO BE SET OFF AGAINST THAT AMOUNT THE SUM OF $1,373.67, REPRESENTING THE STIPULATED GROSS INCOME RECEIVED BY THE PLAINTIFF FROM HER CIVILIAN EMPLOYMENT DURING THE PERIOD INVOLVED. IN AN EARLIER OPINION REPORTED IN 148 CT.CL. 404 (1960), THE COURT CONCLUDED THAT CLACKUM, WHO WAS SEPARATED FROM THE AIR FORCE ON JANUARY 22, 1952, WITH A DISCHARGE "UNDER CONDITIONS OTHER THAN HONORABLE" AND WHO UNSUCCESSFULLY APPEALED TO THE AIR FORCE DISCHARGE REVIEW BOARD, WAS NOT SEPARATED FROM THE AIR FORCE, SINCE HER PURPORTED DISCHARGE WAS INVALID.

THE EGAN CASE INVOLVED A FORMER OFFICER OF THE MARINE CORPS WHO THE COURT OF CLAIMS HELD, BY REASON OF ERRORS OF FACT AND MISTAKEN IDENTITY, WAS ILLEGALLY AND ERRONEOUSLY RELEASED FROM ACTIVE DUTY ON OCTOBER 28, 1943, AND ILLEGALLY DISCHARGED ON APRIL 11, 1944. ON MARCH 17, 1948, HIS RECORDS WERE CORRECTED FOR THE PURPOSE OF CHANGING HIS DISCHARGE TO AN HONORABLE ONE AND ON APRIL 7, 1948, THE MARINE CORPS ISSUED ORDERS CANCELLING THE PRIOR ERRONEOUS DISCHARGE AND SUBSTITUTING THEREFOR AN HONORABLE DISCHARGE. INASMUCH AS THE BOARD FOR THE CORRECTION OF NAVAL RECORDS REFUSED TO FURTHER CORRECT HIS RECORDS ON HIS SUPPLEMENTAL APPLICATION FOR PAYMENT OF RETROACTIVE PAY AND ALLOWANCES AS A LIEUTENANT AND LATER AS A CAPTAIN, HE BROUGHT SUIT IN THE COURT OF CLAIMS. THE COURT HELD THAT HE WAS ENTITLED TO RECOVER ACTIVE DUTY PAY AND ALLOWANCES FROM MARCH 1, 1943, TO APRIL 7, 1948,"LESS HIS EARNINGS FROM CIVILIAN EMPLOYMENT" DURING THE PERIOD INVOLVED. WHILE THE RECORD SHOWS THAT THIS FORMER OFFICER WAS EMPLOYED BY THE VETERANS ADMINISTRATION DURING PART OF THAT PERIOD, THERE IS NOTHING IN THE DECISION TO SHOW THAT THE COURT IN CONCLUDING THAT THE SET-OFF WAS PROPER INTENDED TO DISTINGUISH EARNINGS DERIVED BY VIRTUE OF EMPLOYMENT IN A FEDERAL AGENCY FROM THOSE THAT MAY HAVE BEEN DERIVED THROUGH NON-FEDERAL EMPLOYMENT.

ON MARCH 6, 1963, THE SAME DATE THE COURT RENDERED ITS DECISION IN THE CLACKUM CASE, IT ALSO GRANTED JUDGMENT IN A COMPANION CASE, GARNER V. UNITED STATES, CT.CL. NO. 23-58. GARNER WAS HELD TO HAVE BEEN ILLEGALLY DISCHARGED FROM THE AIR FORCE ON THE SAME DATE AND UNDER THE SAME CIRCUMSTANCES AS CLACKUM. THE JUDGMENT OF THE COURT IN THAT CASE WAS TO THE EFFECT THAT GARNER WAS ENTITLED TO RECOVER THE AMOUNT OF $7,093.91, REPRESENTING THE DIFFERENCE BETWEEN $37,237.12, THE STIPULATED TOTAL PAY, ALLOWANCES, AND MEDICAL EXPENSES FOR THE PERIOD JANUARY 23, 1952, TO MARCH 10, 1961, DUE HER, AND $30,143.21, THE GROSS INCOME RECEIVED BY HER IN CIVILIAN EMPLOYMENT.

SINCE THE HOLDINGS IN THE CLACKUM AND GARNER CASES RECOGNIZING THE DEDUCTION FROM THE MILITARY PAY AND ALLOWANCES OF EARNINGS FROM CIVILIAN EMPLOYMENT APPARENTLY WERE PREDICATED UPON THE HOLDING IN THE EGAN CASE, A CASE WHICH INVOLVED THE ENTITLEMENT OF A DISCHARGED FORMER OFFICER TO RETROACTIVE PAY AND ALLOWANCES AS A RESULT OF THE CORRECTION OF HIS MILITARY RECORDS, IT WOULD APPEAR THAT THERE IS A SUBSTANTIAL BASIS FOR THE VIEW THAT RETROACTIVE PAY AND ALLOWANCES FOUND DUE A MEMBER OR FORMER MEMBER BY REASON OF A CORRECTION OF HIS MILITARY OR NAVAL RECORDS SHOULD BE SUBJECT TO A DEDUCTION OF ANY EARNINGS HE MAY HAVE RECEIVED FROM CIVILIAN EMPLOYMENT DURING THE CORRESPONDING PERIOD.

ASIDE FROM THE ABOVE-CITED COURT CASES, IT IS A WELL ESTABLISHED PRINCIPLE OF LAW THAT, IN AN ACTION BY AN EMPLOYEE AGAINST A FORMER EMPLOYER ON ACCOUNT OF A WRONGFUL DISCHARGE, A DEDUCTION OF THE NET AMOUNT WHICH THE EMPLOYEE EARNED OR MIGHT REASONABLY HAVE EARNED IN OTHER EMPLOYMENT OF LIKE NATURE FROM WHAT HE WOULD HAVE RECEIVED HAD THERE BEEN NO BREACH OF CONTRACT, FURNISHES THE ORDINARY MEASURE OF DAMAGES. SEE SECTIONS 1358 AND 1359, VOLUME 5, WILLISTON ON CONTRACTS (REV.ED. 1937). SEE ALSO SECTION 1095, VOLUME 5, CORBIN ON CONTRACTS, AND 56 CORPUS JURIS SECUNDUM, MASTER AND SERVANT, SECTION 59. CONSIDER FURTHER THE CASE OF PIERCE V. TENNESSEE COAL, IRON AND RAILROAD COMPANY, 173 U.S. 1 (1898), IN WHICH THE SUPREME COURT OF THE UNITED STATES SAID:

"IN ASSESSING THE PLAINTIFF'S DAMAGE, DEDUCTION SHOULD, OF COURSE, BE MADE OF ANY SUM THAT THE PLAINTIFF MIGHT HAVE EARNED IN THE PAST OR MIGHT EARN IN THE FUTURE, AS WELL AS THE AMOUNT OF ANY LOSS THAT THE DEFENDANT HAD SUSTAINED BY THE LOSS OF THE PLAINTIFF'S SERVICES WITHOUT THE DEFENDANT'S FAULT.'

ADDITIONALLY, SEE RUSSELL V. BARNES FOUNDATION, 50 F.SUPP. 174 (E.D. PA., 1943); FEE, ET AL. V. ORIENT FERTILIZING CO., 36 F. 509 (E.D.N.Y., 1888); AND THE CORNELIA AMSDEN, 6 FED. CASES NO. 3234 (N.D.N.Y., 1871).

IT APPEARS THAT THE ABOVE PRINCIPLE OF LAW HAS BEEN RECOGNIZED AND GIVEN EFFECT BY THE FEDERAL COURTS UNDER VARIOUS FEDERAL STATUTES IN AWARDING COMPENSATION BECAUSE OF IMPROPER OR UNLAWFUL DISCHARGES UNDER THEIR NON- FEDERAL EMPLOYMENT CONTRACTS. FOR EXAMPLE, IN THE CASE OF NATIONAL LABOR RELATIONS BOARD V. MACKAY RADIO AND TELEGRAPH CO., 304 U.S. 333 (1938), IN WHICH AN ORDER OF THE NATIONAL LABOR RELATIONS BOARD WAS IN DISPUTE, THE SUPREME COURT OF THE UNITED STATES SAID:

"* * * THE ORDER IS CRITICIZED AS ARBITRARY IN THAT IT IS SAID TO AWARD BACK PAY TO DATE OF REINSTATEMENT WITH DEDUCTIONS ONLY FOR WHAT WAS EARNED TO THE DATE OF THE ORDER. WE DO NOT SO READ IT, AND THE BOARD ADMITS THAT CREDIT MUST BE GIVEN FOR ALL SUMS EARNED TO DATE OF REINSTATEMENT AND SO CONSTRUES THE ORDER.'

SEE ALSO DAHL V. THE S.S. AMIGO, 202 F.SUPP. 890 (S.D.ALA.S.D., 1962); BUSTER V. CHICAGO, M., ST.P. AND P.R. CO.; 195 F.2D 73 (7TH CIR., 1952); AND SCHLENK V. LEHIGH VALLEY R. CO., 74 F.SUPP. 569 (D.N.J., 1947). NONE OF THE FEDERAL STATUTES INVOLVED IN THESE CASES SPECIFICALLY PROVIDED FOR A DEDUCTION OF INTERIM EARNINGS FROM THE BACK PAY AWARDED AN EMPLOYEE.

IN THE FIELD OF FEDERAL CIVILIAN EMPLOYMENT THERE ARE SEVERAL STATUTES WHICH PROVIDE FOR THE PAYMENT OF RETROACTIVE COMPENSATION TO EMPLOYEES WHO AFTER REMOVAL OR SUSPENSION WITHOUT PAY ARE REINSTATED OR RESTORED TO DUTY. HOWEVER, THOSE PROVISIONS OF LAW, 5 U.S.C. 22-1, RELATING TO SUSPENSION IN THE INTEREST OF NATIONAL SECURITY, AND 5 U.S.C. 652, INVOLVING GOVERNMENT EMPLOYEES IMPROPERLY SUSPENDED OR REMOVED, SPECIFICALLY PROVIDE FOR THE DEDUCTION OF THE AMOUNTS EARNED BY THE EMPLOYEES THROUGH OTHER EMPLOYMENT DURING THE INTERIM PERIOD. SEE 32 COMP. GEN. 408 AND 34 COMP. GEN. 382 AND 384. WHILE, AS HEREINBEFORE STATED, THE PROVISIONS OF 10 U.S.C. 1552, ENTITLING MEMBERS OR FORMER MEMBERS OF THE COAST GUARD TO RETROACTIVE PAY AND ALLOWANCES UNDER CERTAIN CIRCUMSTANCES WHEN THEIR RECORDS ARE CORRECTED, CONTAIN NO EXPRESS REQUIREMENT FOR DEDUCTION OF EARNINGS RECEIVED FROM CIVILIAN EMPLOYMENT, WE FIND NOTHING IN THE LEGISLATIVE HISTORY OF SUCH PROVISIONS INDICATING CIVILIAN EMPLOYEES IN THAT RESPECT OR TO PRECLUDE THE APPLICATION OF THE GENERAL RULES REGARDING DEDUCTION OF EARNINGS FROM OTHER EMPLOYMENT AND MITIGATION OF DAMAGES, AS APPLIED IN THE ABOVE COURT CASES IN CASES WHERE RETROACTIVE PAY AN ALLOWANCES ARE TO BE PAID INCIDENT TO A CORRECTION OF MILITARY OR NAVAL RECORDS.

PAY AND ALLOWANCES FOUND DUE IN ANY CASE UNDER THE CORRECTION OF RECORDS LAW ARE PAYABLE FROM FUNDS APPROPRIATED TO YOUR DEPARTMENT AND THE CHARACTER OF THE PAYMENT IS NO DIFFERENT FROM THAT PAID TO A MEMBER FOR HIS PERFORMANCE OF ACTUAL ACTIVE DUTY. IN THIS RESPECT, THE COURT OF CLAIMS IN THE EGAN CASE SAID:

"* * * THE PAYMENT AUTHORIZED BY SECTION 207 (B) (NOW 10 U.S.C. 1552 (C) ( IS NOT FOR SERVICES ACTUALLY PERFORMED ON ACTIVE DUTY, BUT RATHER FOR SERVICES WHICH WOULD HAVE BEEN PERFORMED HAD THE ERROR AND INJUSTICE CORRECTED BY THE BOARD NOT OCCURRED.'

THE CONGRESS ENACTED THE CORRECTION OF RECORDS LAW TO AUTHORIZE THE DEPARTMENTS "TO CORRECT AN ERROR OR REMOVE AN INJUSTICE" AND NOT TO PLACE MEMBERS OR FORMER MEMBERS IN A MORE ADVANTAGEOUS POSITION WHEN THEIR MILITARY RECORDS ARE CORRECTED THAN MEMBERS WHO REMAINED IN THE SERVICE AND RECEIVED LIKE PAY AND ALLOWANCES, BUT NO ADDITIONAL CIVILIAN EARNINGS. TO PERMIT THE SUCCESSFUL MEMBER OR FORMER MEMBER IN A RECORD CORRECTION CASE TO HAVE RETROACTIVE PAYMENTS FROM THE GOVERNMENT AND RETAIN EARNINGS FROM CIVILIAN EMPLOYMENT FOR THE RETROACTIVE PERIOD INVOLVED WOULD IN EFFECT SERVE TO UNDULY ENRICH HIM AND THUS WOULD TEND TO DEFEAT THE TRUE PURPOSE OF THE LAW. HAD SUCH MEMBER NOT BEEN DISCHARGED FROM THE SERVICE OR RELEASED FROM ACTIVE DUTY, HE GENERALLY WOULD NOT HAVE HAD AN OPPORTUNITY TO ENGAGE IN CIVILIAN EMPLOYMENT AND RECEIVE AN INCOME THEREFROM. IT IS CLEAR THAT THE PURPOSE OF A CORRECTION OF RECORDS IS TO RESTORE THE MEMBER OR FORMER MEMBER TO THE SAME POSITION THAT HE WOULD HAVE HAD IF HE HAD NOT BEEN SEPARATED FROM THE COAST GUARD. SEE, IN THIS CONNECTION, SEASTROM V. UNITED STATES, 147 CT.CL. 453 (1959), IN WHICH THE COURT SAID (PAGE 458):

"* * * WHEN PLAINTIFF'S RECORDS WERE CORRECTED, HE BECAME ENTITLED AS A RETIRED OFFICER ONLY TO RETIRED PAY FOR PERIODS FOR WHICH ELIGIBLE UNDER THE LAW. THE STATUTE HERE INVOLVED PROHIBITED PAYMENT OF RETIRED PAY TO A RETIRED OFFICER WHO WAS ENGAGED IN SALES ACTIVITIES. WHEN PLAINTIFF'S RECORDS WERE CORRECTED, HE HAD RECEIVED NONE OF THE FUNDS INVOLVED AND AT THE TIME WAS ENTITLED ONLY TO AN AMOUNT HE WOULD HAVE RECEIVED HAD THE CORRECTION NOT BEEN IN FORCE. IN OTHER WORDS, THE CORRECTION WAS MERELY TO PLACE PLAINTIFF IN THE SAME FINANCIAL CONDITION WHICH HE WOULD HAVE OCCUPIED HAD A CORRECTION NOT BEEN NECESSARY. HAD PLAINTIFF BEEN RETIRED INITIALLY FOR PHYSICAL DISABILITY UNQUESTIONABLY HE WOULD NOT HAVE BEEN PAID FOR THE TIME SPENT IN "SELLING.' IT FOLLOWS THAT HE NEVER HAD A RIGHT TO SUCH RETIRED PAY AND THE MERE FACT THAT THE RETIRED PAY WAS RETROACTIVE WOULD NOT RELIEVE THE DEFENDANT OF THE DUTY TO IMPOSE UPON PLAINTIFF THE RESTRICTIONS OF THE SALES ACT.' ALSO SEE 39 COMP. GEN. 170, IN WHICH WE SAID:

"THE CORRECTIONS WHICH WERE MADE IN HIS MILITARY RECORDS HAVE THE EFFECT OF PLACING THE SOLDIER IN AN ACTIVE DUTY STATUS DURING THE PERIOD FROM SEPTEMBER 2, 1948, TO JANUARY 15, 1950, INCLUSIVE,* * *.'

COMPARE 40 COMP. GEN. 502, 504; 39 COMP. GEN. 213, 215; AND OUR DECISION OF JUNE 26, 1962, B-148868.

ACCORDINGLY, IT IS OUR VIEW THAT, IN ORDER TO PROPERLY APPLY THE LAW AND PROTECT THE INTERESTS OF THE UNITED STATES APPROPRIATE STEPS SHOULD BE TAKEN IN CASES IN WHICH RETROACTIVE PAYMENTS OF ACTIVE DUTY PAY AND ALLOWANCES BECOME DUE AS A RESULT OF CORRECTION BOARD ACTION TO DEDUCT THE EARNINGS RECEIVED BY THE MEMBER OR FORMER MEMBER FROM PRIVATE AS WELL AS GOVERNMENT CIVILIAN EMPLOYMENT DURING THE PERIOD COVERED BY THE PAY AND ALLOWANCES FOUND PAYABLE TO HIM. HENCE IT IS OUR OPINION THAT DECISIONS RELATING TO THE DEDUCTION OF INTERIM EARNINGS FROM THE COMPENSATION FOUND DUE FEDERAL CIVILIAN EMPLOYEES WHO HAVE BEEN REINSTATED OR RESTORED TO DUTY UNDER THE PROVISIONS OF 5 U.S.C. 22-1 AND 5 U.S.C. 652 SHOULD GENERALLY BE APPLIED IN LIKE CIRCUMSTANCES INVOLVING MEMBERS AND FORMER MEMBERS OF THE COAST GUARD WHO BECOME ENTITLED TO RETROACTIVE PAY AND ALLOWANCES BECAUSE OF THE CORRECTION OF THEIR MILITARY RECORDS. WE WOULD APPRECIATE YOUR FURNISHING US AN EXPRESSION OF YOUR VIEWS ON THIS MATTER. A SIMILAR LETTER IS BEING SENT TO THE SECRETARY OF DEFENSE.